Governor Kay Ivey joined Florida Gov. Ron DeSantis and 17 other states to oppose President Joe Biden's efforts to keep environmental, social and governance (ESG) investing in employee pension plans.
ESG is an approach to evaluating how a corporation aligns itself with social goals beyond earning a profit for its shareholders. These goals often pertain to environmental sustainability, advocacy for certain social movements, and commitment to "diversity, equity and inclusion" (DEI).
Organizations, such as MSCI, award ESG scores to corporations supposedly based on their adherence to ESG values. Large asset management groups, such as BlackRock Inc., Vanguard and State Street, and banks, such as JPMorgan and Bank of America, use ESG ratings to choose where to direct capital.
ESG investing has become controversial as its critics have dubbed it a "wokeness report card" and compared it to China's social credit score system.
The Republican-dominated U.S. House of Representatives voted on February 28 to pass a bill prohibiting the use of ESG investing in Employee Retirement Income Security Act (ERISA)-governed retirement plans. Biden subsequently promised to veto the rule.
DeSantis, Ivey, and the governors of Alaska, Arkansas, Georgia, Idaho, Iowa, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Oklahoma, South Dakota, Tennessee, Utah, West Virginia, and Wyoming released a joint statement vowing to "work together and leverage our state pension funds to force change in how major asset managers invest the money of hardworking Americans."
"The proliferation of ESG throughout America is a direct threat to the American economy, individual economic freedom and our way of life, putting investment decisions in the hands of the woke mob to bypass the ballot box and inject political ideology into investment decisions, corporate governance, and the everyday economy," the statement read.
According to the statement, the 19 governors may block the use of ESG in all state and local public investments and ban "social credit scores" in banking and lending.
The two primary institutions making public investments on the state level in Alabama are the Treasury and the Retirement Systems (RSA), which handles all public employee pensions.
Alabama Treasurer Young Boozer told 1819 News in October that the Alabama State Treasury does not use ESG as a factor in determining where to make investments with state money, but some of the accounts the state is invested in, managed by third-party companies, might use ESG criteria.
Boozer also said he liquidated a money market mutual fund with BlackRock in July in response to both low returns and the company's political involvement.
Also in October, a spokeswoman for the RSA told 1819 News that the RSA "does not have an ESG plan or use ESG scoring," but the organization might use ESG criteria to the extent that they "impact the profitability of the company and its investment return."
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